PayPal (PYPL +0.16%) and Fiverr (FVRR +0.22%) have several things in common. Both are notable names in disruptive industries that performed well in the early pandemic years but have since significantly lagged behind the market. And despite their poor showing in recent years, PayPal and Fiverr could be great long-term bets. Here's why.
1. PayPal
PayPal, a leader and pioneer in fintech, should benefit from the increased demand for digital payments resulting from secular tailwinds, such as the shift toward e-commerce. The company has a trusted brand name that is intimately tied to digital payments, having been one of the first in that sector. PayPal also has a deep ecosystem. As of the second quarter, it boasted 438 million active consumer accounts and millions of business accounts. It is also a payment option for some major corporations and it handles more than $1 trillion in annual payment volume.
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PayPal's deepening ecosystem is important because it strengthens its network effects and helps it remain a leader in its niche. Though revenue growth has slowed during the past few years, PayPal is working on boosting efficiency and profitability, initiatives that have borne fruit in recent quarters. Furthermore, PayPal should succeed in boosting top-line growth as it pounces on new growth opportunities in addition to the long-term tailwind the fintech industry should provide. PayPal recently launched an advertising platform that should see huge success.
NASDAQ: PYPL
Key Data Points
The company's vast ecosystem and transaction volume give it access to data on consumer habits and preferences, a veritable gold mine to help guide ad campaigns for businesses. PayPal's ad ambitions are still in their early innings and have yet to boost the company's financial results, but they will, eventually. So, the company has a strong economic moat, improving profitability, and growth opportunities that should jump-start revenue growth. All these factors make PayPal an attractive long-term bet. The stock may have lagged behind the market of late, but there is plenty of upside, especially for those who initiate a position today.
2. Fiverr
Fiverr is helping power the gig economy by providing a platform where businesses can find freelancers and contractors. The company makes the task easier for both parties. Freelancers can advertise their skills on a website where they know someone will be looking for the services they offer. It all comes with reviews, ratings, samples, portfolios, etc. Meanwhile, businesses can find talent quickly, easily, and cheaply. Everyone wins. Fiverr takes a cut of every transaction it helps facilitate. Note, the company also benefits from network effects as more freelancers join the platform, making it more valuable for businesses seeking their services.
Despite some challenges during the past few years, Fiverr has made tremendous progress. The company has notably become profitable thanks to cost-cutting initiatives and efforts to improve efficiency. Furthermore, recent developments should help boost the company's revenue growth.
NYSE: FVRR
Key Data Points
First, Fiverr acquired AutoDS, which provides fulfillment, price monitoring, marketing, inventory management, and other services to dropshippers, all on a single platform. The transaction helped diversify Fiverr's revenue by adding a new, subscription-based source of income and granting access to new growth opportunities. Second, there is increased demand for artificial intelligence (AI)-related services on the company's platform from businesses that lack the resources larger corporations have to hire entire AI-focused teams.
Fiverr still sees significant room for growth in the niches where it operates. It estimates a total addressable market of $247 billion, which dwarfs its trailing-12-month revenue of $419.1 million. Grabbing even a small slice of this opportunity in the next 10 years would help Fiverr's revenue, earnings, and stock price increase at a good clip throughout this period.
